Orbit Garant Drilling Inc. (TSE:OGD) Stock Catapults 25% Though Its Price And Business Still Lag The Industry

Despite an already strong run, Orbit Garant Drilling Inc. (TSE:OGD) shares have been powering on, with a gain of 25% in the last thirty days. The annual gain comes to 109% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, Orbit Garant Drilling's price-to-sales (or "P/S") ratio of 0.3x might still make it look like a strong buy right now compared to the wider Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 3.4x and even P/S above 26x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

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Check out our latest analysis for Orbit Garant Drilling

How Has Orbit Garant Drilling Performed Recently?

Recent times haven't been great for Orbit Garant Drilling as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Orbit Garant Drilling's future stacks up against the industry? In that case, our free report is a great place to start .

Is There Any Revenue Growth Forecasted For Orbit Garant Drilling?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Orbit Garant Drilling's to be considered reasonable.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 1.4% drop in revenue. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 5.7% as estimated by the only analyst watching the company. That's shaping up to be materially lower than the 70% growth forecast for the broader industry.

With this information, we can see why Orbit Garant Drilling is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Orbit Garant Drilling's recent share price jump still sees fails to bring its P/S alongside the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As expected, our analysis of Orbit Garant Drilling's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for Orbit Garant Drilling you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.